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The 'buy now, pay later' bubble is about to burst

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Re: The 'buy now, pay later' bubble is about to burst

#101

Post by chasd00 »

yladiz wrote: post #11
ivanche wrote: post #10

Earlier quoted context omitted.

If you can afford 12 payments with interest, you can by definition also afford to save for 12 months and then buy the camera. BNPL and credit card companies are masters of exploiting psychology and especially currently prevailing wusiness and entitlement ("But I want it now!!!1!", "I deserve to treat myself like a king").

Okay, I repeat my question above: if you can afford to pay over 12 months (meaning, you don't go into debt to do so), what's inherently wrong with doing it instead of waiting 12 months and paying all at once, besides ideological reasons?

if you can get a loan at 0% interest it's definitely in your best interest to pay that loan back as slowly as possible. The longer you wait the less you effectively owe as inflation does its thing. I'm 46 and still paying on my student loan, the interest rate is so low that (even in normal times) inflation outpaces it. I'm making money by paying it back over decades.

Re: The 'buy now, pay later' bubble is about to burst

#102

Post by mywittyname »

dusted wrote: post #3

I don't get it.. There's a childrens song in Denmark, it's lyrics go, roughly translated "and if you have money, then you can have, but have you none, then you may go!" (it's about buying bread at the bakery).. When I see how people spend money they don't have, I'm always wondering if their parents never sang for them when they were young, or if they are of a particular dim nature. Sure, I can see why some people wou…

I'll be honest with you, it sounds like you've lead a pretty sheltered life. Living in poverty is fucking hard. All around you are parasites looking to take what little you have and kick you back to the floor.

Yeah, of course parents tell their kids to do better in life. But it feels like the world is conspiring against you at every step of the way. The only time anything good happens, it's due to the kindness of someone else, and kindness is not something you see often.

Re: The 'buy now, pay later' bubble is about to burst

#103

Post by alexjplant »

dusted wrote: post #3

I don't get it.. There's a childrens song in Denmark, it's lyrics go, roughly translated "and if you have money, then you can have, but have you none, then you may go!" (it's about buying bread at the bakery).. When I see how people spend money they don't have, I'm always wondering if their parents never sang for them when they were young, or if they are of a particular dim nature. Sure, I can see why some people wou…

I always see articles like this and wonder what the big deal is... I frequently use PayPal Credit, store credit cards, and Affirm on larger purchases because I like being that much more liquid. Then I realize that I always use the 0% APR option and that I've paid exactly $0 of interest to all of these services. I couldn't imagine paying 12% APR for the privilege of owning a $1400 synthesizer much less for a delivery order of sandwiches at a house party (as mentioned elsewhere in this thread).

Side question: how are these services able to offer lower APRs than credit cards without collateral? Do they evaluate your creditworthiness on the basis of paying equal installments as opposed to revolving credit with a minimum payment? If so then how are they different from an old-fashioned personal loan from a bank?

Re: The 'buy now, pay later' bubble is about to burst

#104

Post by nullsense »

matwood wrote: post #81
Vespasian wrote: post #37

Earlier quoted context omitted.

There is nothing inherently wrong with that but it's a lot more risky then saving up. Say after 10 months an unavoidable bill of $4k shows up and I got to pay it. If I'm saving up I can redirect that money. It sucks that I don't get the camera when I planned to but otherwise I'm fine. Under a BNPL plan I have no extra money to allocate and might have to dip into Credit (potentially with high interest). In short: Savi…

> There is nothing inherently wrong with that but it's a lot more risky then saving up. Cash is king. Assuming 0% interest, it's financially better and less risky to do BNPL. This is separate from all the other financial decisions like savings, etc... It's similar with CCs. I love my CCs and get a ton of value and free stuff by using them. I also have never carried a CC balance in 20+ years. Someone who is financiall…

>Someone who is financially disciplined is leaving money on the table when not using CCs.

The trick is knowing whether or not you're financially disciplined. And usually one finds out the hard way. It often involves a credit card or credit facility of some nature.

Re: The 'buy now, pay later' bubble is about to burst

#105

Post by jermaustin1 »

sidewndr46 wrote: post #77
yladiz wrote: post #7

Earlier quoted context omitted.

I think this is a bit too simplistic of a way to look at it. Having sone debt is not necessarily bad, even outside of enormous purchases such as a house or car. First, c'mon, people don't (directly) finance sandwiches. Have you ever seen a sandwich shop accept Klarna? If you're talking about a credit card that's something but that's not what this article is talking about, which is BNPL. Second, in general it's not as…

Invariably people who use that service plan to spend 100% of their monthly income. Whenever you have an unexpected expense in that 12 month time frame and have to pay for that, then you can't make the payment on that loan.

> Invariably...

Hate to throw a variable into it, but I usually spend less than 50% of my income (after savings and retirment), and I still use BNPL and payment plans when I can get interest rates and fees for under 10%.

Re: The 'buy now, pay later' bubble is about to burst

#106

Post by matwood »

t0mas88 wrote: post #44
geraldwhen wrote: post #28

Earlier quoted context omitted.

This is wild. Have you never had a fraud charge? Reversing fraud of any size takes minutes at most with a credit card. With a debit card you might just lose the money.

This is a very US specific thing and even there I'm not sure it's true. In Europe credit-card usage is much lower, and card security is much higher for both types of cards. We've had chip and pin protected cards for many many years, while the US only caught on in the last few years. Is there objective data that US debit cards have more fraud impact for their users? Or is this really more a PR story from credit card c…

> Is there objective data that US debit cards have more fraud impact for their users?

Depends how tightly someones runs their bank account. A fraudulent charge could come at a bad time and trigger your mortgage payment to fail because of insufficient funds. Though, most bank accounts offer overdraft protection, which is really just an available loan that is automatically taken.

For me, very few charges come directly out of my bank account. Everything else goes through a CC so I can review prior to paying each month.

Re: The 'buy now, pay later' bubble is about to burst

#107

Post by happyopossum »

pandaman wrote: post #68
Vespasian wrote: post #37

Earlier quoted context omitted.

There is nothing inherently wrong with that but it's a lot more risky then saving up. Say after 10 months an unavoidable bill of $4k shows up and I got to pay it. If I'm saving up I can redirect that money. It sucks that I don't get the camera when I planned to but otherwise I'm fine. Under a BNPL plan I have no extra money to allocate and might have to dip into Credit (potentially with high interest). In short: Savi…

Your method is just as risky - say after you've just spent 5K on your camera an unavoidable bill of $4K shows up? Now you have no extra money and have to dip into Credit (potentially with high interest). Your best strategy would have been to have $5K on hand and still use financing if the terms are favorable - it keeps your funds at steady level, allows for future planning and gives you opportunities to invest or oth…

Then you sell the camera and pay off the bill. Sheesh - it's a camera, not a life support machine...

Re: The 'buy now, pay later' bubble is about to burst

#108

Post by lozenge »

sbuccini wrote: post #86
ceejayoz wrote: post #76

Earlier quoted context omitted.

> It doesn't provide any actual reasons for why BNPL is a bubble nor why such a supposed bubble is about to burst. I'll provide one: it only made any significant sense in the near-zero interest rate levels we had last year. "Split it into four payments for $0 fee" is attractive. Much less so when there's a fee; Amazon's BNPL via Affirm is now up to 10-30% APR from the previous 0%. At those rates, people just put it o…

Your claims are not true for several reasons: - Whenever you see a BNPL offer for 0% it means the merchant is paying the interest on behalf of the consumer. The merchants are in charge of making that decision, not Affirm. Affirm earns interest on every loan. Many merchants choose to assume that cost because it greatly increases conversion rates. Replies to my comment only confirm this fact (“I only ever used BNPL cau…

Merchants pay the interest because they see larger basket amounts and therefore more revenue. If the cost to them increases then it can reach a point where it's no longer attractive.

Re: The 'buy now, pay later' bubble is about to burst

#109

Post by dazc »

mschuster91 wrote: post #64
dusted wrote: post #63

Earlier quoted context omitted.

I'm not entirely ignoring it, but I don't believe it holds true for things like cars. I've driven bangers my whole life, I mean really driven them to death, some to the point where they die on the highway, and I will do a quick inspection to decide whether I want to fix that or just have it towed direct to junk. Now, cars are insanely taxes in Denmark, near 300%, and they lose about half their value the first year of…

> I'm not entirely ignoring it, but I don't believe it holds true for things like cars. I've driven bangers my whole life, I mean really driven them to death, some to the point where they die on the highway, and I will do a quick inspection to decide whether I want to fix that or just have it towed direct to junk. Yeah, but you have the knowledge and skills that you can determine if a beater car is worth the effort.…

Old French cars break down a lot and soon become worthless or a complete liability. Old German cars break down less but cost a small fortune to repair when they do. British cars such a Range Rovers and Jaguars can be problematic from day one and will continue to deteriorate thereafter. Old Japanese cars tend to keep going forever.

There are a few outliers such as some older Fords that were over engineered but, generally speaking, observe the 4 points above and you won't go far wrong.

Re: The 'buy now, pay later' bubble is about to burst

#110

Post by jerf »

sbuccini wrote: post #86
ceejayoz wrote: post #76

Earlier quoted context omitted.

> It doesn't provide any actual reasons for why BNPL is a bubble nor why such a supposed bubble is about to burst. I'll provide one: it only made any significant sense in the near-zero interest rate levels we had last year. "Split it into four payments for $0 fee" is attractive. Much less so when there's a fee; Amazon's BNPL via Affirm is now up to 10-30% APR from the previous 0%. At those rates, people just put it o…

Your claims are not true for several reasons: - Whenever you see a BNPL offer for 0% it means the merchant is paying the interest on behalf of the consumer. The merchants are in charge of making that decision, not Affirm. Affirm earns interest on every loan. Many merchants choose to assume that cost because it greatly increases conversion rates. Replies to my comment only confirm this fact (“I only ever used BNPL cau…

"You may be unwilling to pay a fee, many other people are. Plenty of people roll over their CC balances each month and pay even higher APRs."

I get the sense you're not thinking in the margin. This isn't a question of whether "some people" will pay the fee, it's about the fact that as soon as the fee is greater than zero, "some people" won't, and the rate of that will go up as the fee goes up. This isn't a binary thing where suddenly the rate goes from 0% to 100%.

1% or 2% doesn't mean much to me and my household budget, but for these businesses such percentage differences are generally the difference between profit or loss.

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